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Present value is more than cash received.

Financial Reporting

Sir, in this Illustration , the calculated Present Value of the liability is Rs. 104.22 crores, which is higher than the Rs. 100 crores cash received. How should this excess amount be treated upon initial recognition? [Video Time Stamp: 09:17] Video Details ------------- Financial Instruments - FR Derivatives and Embedded Derivatives #6. Illustration 1

K Vamshi

CA Final

★ 14K+

04-Dec-25 23:24

Answers (3)

The present value i.e fair value without option is 104. But the entity got only 100. In other words, 4 is paid towards premium for option. Bank A/c Dr 100 Derivative Asset - Options - 4 To Loan (FL) 104

CA Suraj Lakhotia

Admin

09-Dec-25 14:37

CA Suraj Lakhotia Admin

Okay sir , thank you. What is the treatment of derivative asset sir in this case, when the Derivative Asset will be closed..?

Thread Starter

K Vamshi

CA Final

★ 14K+

09-Dec-25 20:18

If embedded derivative is accounted as separately we will follow derivative principles. Every period end we will check FV and gain or loss will be recognised in PL

CA Suraj Lakhotia

Admin

10-Dec-25 10:22